SA managers’ confidence on the mend


2 December 2011


The seasonally adjusted Kagiso Purchasing Managers’ Index (PMI) picked up some momentum in November, rising by 1.1 index points from October to 51.6 points.


“November was the fourth consecutive month of gains for the PMI, but the index remains below the level of 54.2 reached before the widespread factory sector strikes in July,” Abdul Davids, head of research at Kagiso Asset Management, said on Thursday.


However, Davids noted that the South African PMI number beat consensus expectations of a contraction below 50 and also bucked the international trend of weaker PMI data.


Despite a more upbeat overall PMI number, purchasing managers reported increased concern about future prospects.


Davids added that “the uncertain outlook is reflected in the expected business conditions index, which declined by 7.4 points to 55 – the lowest level since August 2011.”


The less upbeat prospects were corroborated by the PMI leading indicator (i.e. ratio between new sales orders and inventories) that declined to 0.94 from 1.01 during October.


The new sales orders index, which at 30% had the largest weighting of the key PMI sub-components, eased marginally by 0.4 points to 51.2, while the inventory index was the biggest gainer (+3.3 index points) to reach 54.4.


Davids said that this might suggest that purchasing managers expected demand to be somewhat stronger than it turned out to be, i.e. they purchased inputs in anticipation of increased demand, which did not materialise.


On a more positive note, South African business activity index rose by 1.4 points to 52.3. The index averaged 51.6 during October and November versus 46.1 in Q3, which suggested improved actual factory output (compared to Q3) in the final three months of the year.